Fisker Stock: Market Shows Little Confidence (NYSE:FSR)

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Fisker Inc. (New York Stock Exchange: FSR) rebounded sharply from lows in mid-October, but the shares are still down more than 53% year to date as the startup moves ever closer to starting production and recording deliveries to customers. Fisker will start production this month, with a limited quantity number of deliveries this year before climbing further in 2023.

Despite electric vehicle (“EV”) startup approaching and completing major milestones before generating revenue in 2023, the market shows a significant lack of confidence in Fisker’s ability to succeed with its commercialization plans , turning to Magna Steyr (MGA) and Foxconn. mass produce their vehicles. Given the lack of confidence, Fisker could be more susceptible to short-term downside moves, although he has long-term potential.

About to start deliveries

Fisker is nearing the start of deliveries of its Ocean SUV, with production scheduled to start on November 17. Fisker is achieving manufacturing milestones with the first production verification vehicles, a total of 95 prototypes, which have been produced for validation and final testing.

Deliveries for 2022 are likely to be limited in quantity due to the tight turnaround time between the start of production and the end of the year, but 2023 opens up the possibility of rapidly scaling up production. Fisker has stressed that his deal with Magna Steyr is aimed at producing 50,000 vehicles in 2023tripling to 150,000 units in 2024.

Fisker also has an agreement with battery giant CATL to supply ~5 GWh of batteries per year to the ocean, which equates to ~50,000 units per year; over the next three years, Fisker could source more than 150,000 units through this battery supply deal. However, the recent rise in geopolitical tensions could affect this agreement and/or future versions of the agreement, adding the risk that Fisker will have trouble obtaining large quantities of batteries in a short period of time should it have to move away from CATL.

Fisker has a large order book to work with, logging more than 60,000 pre-orders for Ocean and selling all 5,000 units of Ocean One. Fisker has been targeting 80,000 pre-orders by the end of the year.

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The startup is looking to prioritize deliveries of its top models for the Ocean, One and Extreme, but has said it will allocate additional production capacity to its bottom models. Fisker isn’t breaking out pre-order volumes by version, but given its willingness to look at ways to increase annual production beyond 50,000, it suggests demand for all Ocean versions is healthy and strong.

positives ahead

Going forward, Fisker is set to scale deliveries into the tens of thousands next year and revenue into the billions, targeting 50,000 vehicles, with Magna Steyr paving the way for roughly $2.5 billion in potential revenue. in that volume of 50,000 units.

Modeling from 60% of that target volume (even when Fisker believes it has enough supply to meet its initial targets), to account for persistent supply chain issues, execution risk, cancellation risk preorders and macroeconomic headwinds, still projecting revenue of $1.5 billion in 2023.

Fisker has also previously said that he believes he can “potentially sold out capacity through most of 2023 with premium model purchase orders.” By 2023, this equates to scaling production volumes while maintaining ASPs over $60,000, a very attractive picture for revenue growth.

For example: With an average ASP of about $66,000 by 2023, assuming Fisker allocates and sells some of its lower-priced models next year, Fisker would be on track to generate ~$1.98 billion in revenue with 30,000 units; at 50,000, revenue could be in the low $3 billion range (although ASPs could drop).

In 2024, Fisker is poised for further growth by launching its second model. Fisker and Foxconn plan to start production of Pear in Ohio and “hope to build a minimum of 250,000 Fisker PEAR units per year at the plant after a ramp-up period.” Although initial volumes in launch year are expected to be minimal, Fisker could be operating more than 150,000 vehicles per year by 2025/ 2026.

Signs of little trust

Even with Fisker nearing the cusp of starting delivery and revenue generation with the potential for rapid growth in 2023, the market is showing little confidence in the automaker: Fisker convertibles are trading well below par. , the shares are short-interested at 33% and the company is trading at a 16% discount to its SPAC valuation and at a discount to its peers.

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Fisker’s $667.5 million convertible notes due 2026 are trading well below face value: the notes last traded on Oct. 25 at $54.06, a 46% discount to par. While part of this is due to the share price falling, to $8.15 relative to the convertible price of $19.70. Convertibles trading so far below par with four years to maturity demonstrate the market’s doubts about Fisker’s chances of success: By 2026, Fisker should be operating in excess of 300,000 units annually, with multiple vehicle models on the market. market; assuming that at such a scale, Fisker could be operating in a positive free cash flow state, with single- to double-digit net margins. If so, the company could easily pay off this debt; however, the value of the notes currently raises substantial questions about Fisker’s ability to pay.

Fisker 2026 convertible bond price


Aside from the bonds trading well below par, the high Fisker short rate also suggests that confidence in its stocks is slipping. Fisker’s estimated short-term interest as of October 28 was 35.38%, with a borrowing cost of 19.59%. Fisker has one of the highest short-term interest rates in the electric vehicle industry, as the market is placing substantial bets against the rollout of electric vehicles.

Rival Lucid Group, Inc. (LCID), another heavily shorted EV startup with a short 22% stake, is on track to generate just ~$850 million through 2022 after cutting production this year by more than 60 percent. %. Lucid is projected to end the year with an ASP close to $130,000 in its first full year after production, as ASP has been trending negative as lower-priced versions hit the market.

Doing a quick comparison, the edge appears to predominantly favor Fisker in this scenario: revenue is projected to be more than double that of Lucid, putting Fisker at a very attractive EV/sales multiple of 1.4x (on average). revenue projection of $1.5 billion/30,000 units). ) before continued strong growth in deliveries and revenue in 2024; Lucid is valued at more than 28 times sales in its first year of its delivery ramp. Even factoring in the possibility of raising $750 million or so in cash, Fisker is still trading at just 2x sales.

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Additionally, Fisker is also trading at a fair discount to its SPAC valuation, although the SPAC boom in 2021 saw dozens of companies generate multi-million dollar valuations only to lose more than 80% of value in less than twelve months. Unlike IPOs, SPACs allowed these companies to provide prospective financial information to drive interest and valuations. Fisker has struggled to maintain his SPAC valuation, sitting around 16% below his $2.9 billion SPAC valuation – trading at this discount as the company is just weeks away from starting deliveries and generating revenue also points to the market remaining dubious about the prospects for Fisker (and/or the EV startup cohort).

This relative valuation mismatch, coupled with the bond price, short interest, and SPAC valuation discount, suggests that the market: a) is concerned that Fisker may not scale to these grades or does not trust the company to take off ; or b) assigning lower multiples to the electric vehicle industry as a whole, a theme that has already been seen this year.


Fisker is nearing a long-anticipated production start for its Ocean SUV, with production expected to begin on November 17 and deliveries to begin shortly after. Although deliveries and revenue are expected to be minimal this year, Fisker is poised to scale significantly with partner Magna Steyr in 2023, paving the way for an attractive delivery ramp through the year with around $1 billion in potential revenue. to 60% of your target. output.

However, the market is expressing significant doubts about Fisker, with its convertible bonds trading well below par, in part due to the share price’s discount relative to the convertible price, its high short yield and a relatively low valuation. down along with a discount to your SPAC valuation. . As such, Fisker shares could be poised for short-term underperformance and prone to downside volatility even with growth unlocked.

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